Fresh
residential property data, analysis shows prices still falling - and "no
light at the end of the tunnel".

Days after SA Reserve Bank governor Tito Mboweni took a break from lowering
South Africa's interest rates, house price data and analysis from two
big banks shows property values are still falling.

FNB's June house price index shows the "accelerating deflation trend
remains intact" while Standard Bank's monthly property report and
median house price figure confirm that the strain has not alleviated in
the residential market.

Unfortunately, says Standard Bank, there is "still no light at the
end of the tunnel". The weakness in the market is set to continue,
it said.

The bank's property book for the first half of 2009 shows an average
monthly decline of 3.3% in the median house price and Standard Bank says
that in real terms (stripping out inflation) the decline in house prices
comes to about 12%.

The value of the median house financed by Standard Bank was R523 000.

FNB Home Loans' strategist John Loos says data revisions thanks to extra
transactions coming into the low volume April and May figures means the
picture looks slightly better than previously thought.

But it is "still very weak", with prices falling at just over
10% year-on-year compared to a revised -8,5% for May.

Loos said the "ongoing deteriorating trend was pretty much as expected,
with the oversupply of property on the market continuing. Interest rate
cuts may well have totalled 450 basis points since December, but this
has had no more than a marginal impact on property demand to date, it
would appear."

Banks have been criticised for failing to relax credit criteria and pass
on more of the benefits of repo rate cuts to their clients - and are therefore
seen as partly to blame for the harsh property market conditions.

Said Loos: "Banks remain cautious, although FNB has announced a
mild relaxation of credit policy, and household indebtedness as measured
by the debt-todisposable income ratio remains high due to growth in disposable
income being under severe pressure in a recessionary environment."

The high debt ratio, said Loos, is sustained by disposable income growth
falling at a faster rate than household credit growth in recent quarters.
"Therefore, the pressured household sector is unable to respond nearly
as aggressively to rate cuts today as it did in 1999 and 2003 when indebtedness
was far lower."

Loos singled out the affordable housing market as being, possibly, "the
weakest link". The FNB Property Barometer survey supports a theory
that people are selling to downscale because of financial pressure in
lower income areas. "This shouldn't surprise in these recessionary
times. Less skilled labour often comes off worse in economic downturns
than the more supply-constrained highly skilled labour that supports the
higher end of the market," he noted.

FNB expects house prices to continue falling for the rest of this year,
though the rate is expected to subside towards the end of 2009.

FNB breaks the major metro areas into four price segments:

The top 10% (highest priced suburbs accounting for 10% of total volumes
of transactions by individuals over a 5-year period) with a price average
of R1.852m;

High income areas (the next 30% of the market) with an average price
of R1.134m;

Middle income areas (the following 30%) with an average price of
R746,416; and

Affordable areas (the bottom 30% of areas) with an average price
of R350,007.